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Financial News: China Cuts 14-day Reverse Repo Rate

China Cuts 14-day Reverse Repo Rate

12/17/2019 - 22:28:00 (RTTNews)

(RTTNews) - China's central bank reduced its 14-day reverse repurchase rate marginally on Wednesday after cutting the short-term 7-day repo rate a month ago.

The People's Bank of China, on Wednesday, lowered its rate on 14-day reverse repo agreement to 2.65 percent from 2.7 percent. The central bank also injected CNY 200 billion into the financial system via reverse repurchase agreements.

Last month, the bank had reduced the seven-day repurchase rate to 2.50 percent from 2.55 percent, which was the first reduction since October 2015.

The latest move appears intended to nudge interbank rates lower at a time of the year when they often jump due to a seasonal pick-up in liquidity demand, Julian Evans-Pritchard, an economist at Capital Economics, said.

Although a five basis point reduction is marginal, it is a sign that the PBoC remains in easing mode and may be just enough to convince banks to make another 5 basis point cut this Friday to the Loan Prime Rate, the benchmark upon which loans are now priced, the economist added.

While policymakers are reluctant to engineer a sharp rebound in credit growth, more easing will probably be needed just to keep credit growth broadly stable and prevent economic activity from weakening too quickly, the economist noted.

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